ScotusWiki summarizes here.
From the argument preview they prepared:
Tomorrow in Nos. 07-1078 and 07-1059, USEC v. Eurodif and United States v. Eurodif, the Supreme Court will consider whether the Federal Circuit should have accorded Chevron deference to the Commerce Department’s construction of 19 U.S.C. § 1673. That statute allows the Commerce Department to impose duties on imports of foreign merchandise when that merchandise is “being, or is likely to be, sold in the United States at less than its fair value” – a practice known in the international trade world as “dumping” – and the dumping causes or threatens to cause material injury to a U.S. industry.
The agency deference question is, even more than in most cases, inextricably intertwined with the complicated facts of the case. The product at issue in the Eurodif is low enriched uranium (LEU), which is used in fuel rods at nuclear power plants to produce electricity. To produce LEU, uranium ore must pass through a multi-step process that, among other things, increases the level of fissionable uranium – a step known as “enrichment.”
Both USEC and Eurodif enrich uranium – USEC at its plant in Kentucky and Eurodif in France. Uranium enrichers usually enter into one of two types of contracts with their customers. The first option is an EUP (“enriched uranium product”) contract, pursuant to which the customer pays the enricher a cash price for a specified amount of LEU. The second option, and the one at issue in this case, is a SWU (“separative work units,” pronounced “swoo”) contract, pursuant to which the customer provides the enricher with unenriched uranium; the customer receives LEU and pays the enricher for the work required to transform the unenriched uranium into LEU.
Nearly eight years ago, USEC filed a petition with the Commerce Department and the International Trade Commission, asking it to investigate sales of LEU by Eurodif in the United States. The Commerce Department agreed with USEC that LEU was being sold in the U.S. at less than fair value; after the ITC found that the LEU imports were causing injury to the domestic uranium enrichment industry, Commerce imposed dumping duties.
The critical issue in the lower courts, and which underlies the question presented in this case, is whether LEU imports made pursuant to the SWU contracts (i.e., those in which the customer provides unenriched uranium and cash and receives LEU in return) should be regarded as a sale of merchandise, which is subject to the antidumping laws, or a sale of services, which is not. In its initial proceeding, Commerce reasoned that SWU contracts should be treated the same as an EUP contract because they involve “a major manufacturing process,” rather than a mere sale of services; a contrary ruling, Commerce posited, would create a loophole in the antidumping laws that foreign producers and their U.S. customers could exploit by framing their transactions so that the U.S. customers were purchasing services, rather than goods. On a subsequent remand from the Court of International Trade (the procedural history is too complicated to detail here completely), Commerce reiterated that imports of LEU pursuant to SWU contracts are sales of goods for purposes of the antidumping laws because they involve a transfer of ownership in the LEU (because there is no guarantee that the LEU received by a customer is created from the same unenriched uranium which the customer supplied).
The CIT reversed. It rejected Commerce’s conclusion that the LEU sales pursuant to a SWU contract involved a transfer of ownership, reasoning instead that “the contracts delineate a transaction in which a utility provides raw material to an enricher, pays for the service of processing the material, and obtains the finished product after the manufacturing service has been performed.” The Federal Circuit affirmed, and the U.S. and USEC filed petitions for certiorari, which the Court granted.
And from the oral argument summary:
Arguing for petitioner United States of America, Deputy Solicitor General Malcolm Stewart spent most of his first turn at the podium parrying questions about exactly what Commerce’s test was and how it should be applied in a wide variety of cases. In response to a hypothetical posed by (of course) Justice Breyer, Stewart posited that when a U.S. customer provided grain to an overseas company for milling, the finished produce would be subject to the antidumping laws. Justice Breyer also expressed concern that importers would not have expected transactions such as the uranium enrichment contracts at issue to be subject to the antidumping laws given Commerce’s prior regulations and decisions.
Continuing a line of questions about how to apply Commerce’s test, the Chief Justice pressed Stewart on the question whether the test hinged on the fungibility of the raw materials or the substantial transformation of those raw materials. It is important to make this clear, the Chief Justice explained, “so that business people can know when they are going to be subject to this regime.” Stewart responded that substantial transformation was the ultimate touchstone in the test, but he also emphasized that the case was made “much easier by virtue of the fact that the enricher dealt with fungible goods and also had substantial discretion to decide” how to produce the contracted-for quantity of uranium. Addressing another hypothetical – this time from the Chief Justice and involving a diamond carved out of a big rock – Stewart acknowledged that there is a “gray area” regarding whether a change constitutes a substantial transformation, but he emphasized that in this case all of the parties have agreed that there was a substantial transformation.
Finally, Justice Stevens returned to the text of the statute, asking whether the statute’s requirement that the merchandise at issue be “sold” in the U.S. is ambiguous. Stewart maintained that, at least “at the margins,” it is, and he contended that Congress intended any ambiguity to be resolved by the agency rather than the courts.
Representing petitioner USEC, H. Bartow Farr acknowledged that the uranium transactions at issue “can be thought about reasonably enough in different ways.” But the question before the Court, he emphasized, was whether Commerce’s interpretation of the statute was reasonable.
Justice Breyer again reiterated his concern that Commerce’s interpretation represented a change in policy on which importers may have relied. Farr sought to allay those concerns, noting that in this case in particular utilities and enrichers had conceded that “they did not set up their transactions in this way in order to comply with prior decisions of the Commission.” And referring to a line of questions regarding the Federal Circuit’s decision in the Florida Power and Light case, in which that court held – at the government’s urging – that the same transactions involved a service rather than the sale of goods, Farr distinguished the FPL case as not presenting a Chevron deference question.
As it did during Stewart’s time at the podium, the Court sought to flesh out the contours of Commerce’s test. And like the United States, Farr responded that when you have both fungible raw material and a substantial transformation of that material, the antidumping laws apply. He left open the possibility that with a substantial transformation but no fungible raw material, Commerce might nevertheless retain the discretion to treat it as a sale of goods.
